Signal on Fed rates sends stocks rising

NEW YORK » Wall Street made a moderate advance yesterday as investors welcomed signs that the Federal Reserve may be close to ending its string of interest rate hikes.

While the Fed raised interest rates a quarter percentage point to 4.25 percent yesterday, the market was pleased by a revision to the central bank's economic assessment in which it no longer characterized its rate hikes as accommodative. That change was widely seen as an adjustment in Fed monetary policy.

Analysts had been expecting the Fed's decision -- the 13th consecutive rate increase in 18 months -- and many anticipate one more boost at outgoing Chairman Alan Greenspan's final policymaking meeting in January.

But recent reports of strengthening economic indicators now have some concerned that more increases could be in store, and that may have limited the market's advance following the Fed's midafternoon announcement. The Fed previously slashed rates to record lows to spur the economy, and has been gradually pushing them upward to battle inflation.

"At this point, it's difficult to see them stopping with one more (increase)," said Christoper Piros, investment strategist for Prudential's Strategic Investment Research Group. "There will almost certainly be two more. But I do think there is a risk they may have already gone far enough, if not too far."

At the close of trading, the Dow Jones industrial average gained 55.95, or 0.52 percent, to 10,823.72. The Dow opened the session in negative territory and surged 103 points after the Fed announcement.

Bonds rose after the Fed's rate decision, with the yield on the 10-year Treasury note sliding to 4.52 percent from 4.55 percent late Monday. The dollar was mixed against other major currencies in European trading, while gold prices pulled back from recent highs.

Oil prices were flat following a brisk runup Monday as another snowstorm approached the Northeast, with a barrel of light crude adding 7 cents to settle at $61.37 on the New York Mercantile Exchange.